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Globalization: Who Benefits from it?

This term Globalization gets thrown around a lot these days and few of us agree on what it is although we each have our own definition. One thing many of us do agree on, however, is that globalization is not a good thing and that it has something to do with the current erosion in our perceived economic situation. If I can suggest one textbook style definition, we could say that it's the free flow of capital, people, technology, know-how, goods and services around the world. Let's leave the emotion aside for a moment and look at some of the effects.

Over the last 20 years, the world has become a much smaller place and we've overcome a lot of obstacles to free trade. This opened us all up to competition from around the globe and the countries with advantages in labor or technology or both benefited greatly from the exchange. We got our cheap Chinese-made products at Costco, and the Chinese got our hard currency. We moved up the food chain to make things like complex computer networks and clever software to run on them. Everyone's a winner, and no one gets hurt, right?

Well, not as long as the home equity bubble kept expanding and our appetite for mindless consumption kept increasing. Now that the bubble's burst and we've realized that the piggy bank's empty, we have to delegate blame. Globalization is as convenient and vague a scapegoat as any to be all things to all people.

To be perfectly unbiased about the whole thing, globalization has played a role in the current debacle, but it's like blaming the riverbed for the flood. Although the interconnections in the financial world engendered by global trade did enable the current strain of recession to become pandemic at a rate of speed we could scarcely have imagined until it happened, the virus was purely man made.

Now Explain: Why the Fear?

What man could screw up so royally by his own hand, he can undo just as well. But now it's all too convenient to see life as a zero sum game. Your gain is my loss, and if we could just keep out those damn cheap Chinese products, jobs wouldn't go abroad and we'd all be better off. Without getting into a complex discussion of macroeconomics, if we cut off the Chinese, we'd have no one to buy our Treasury bonds to finance all of our economic stimulation programs. Money flows in circular patterns and when the circles are cut, the system breaks down.

It's a proven fact that free trade makes everyone better off if we all stick to what each of us can

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